Illinois Tool Company's (ITC) degree of total leverage (DTL) is 3.00 at a sales volume of $9 million. Determine ITC's percentage change in earnings per share (EPS) if forecasted sales increase by 20 percent to $10,800,000.

A) 60%
B) 50%
C) 32%
D) None of the above

Question

Tanner Burnham · Accepted Answer

Final Answer : A, Explanation :  The degree of total leverage (DTL) is used to measure the sensitivity of the company's earnings per share (EPS) to a change in sales. The formula for calculating the percentage change in EPS given a percentage change in sales is: Percentage Change in EPS = DTL × Percentage Change in Sales. Given that the DTL is 3.00 and the forecasted sales increase is 20 percent, the calculation would be: Percentage Change in EPS = 3.00 × 20% = 60%.

Illinois Tool Company's (ITC) degree of total leverage (DTL) is 3.00 at a sales volume of $9 million. Determine ITC's percentage change in earnings per share (EPS) if forecasted sales increase by 20 percent to $10,800,000.

A) 60%
B) 50%
C) 32%
D) None of the above

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Illinois Tool Company's (ITC) degree of total leverage (DTL) is 3.00 at a sales volume of $9 million. Determine ITC's percentage change in earnings per share (EPS) if forecasted sales increase by 20 percent to $10,800,000.A) 60%B) 50%C) 32%D) None of the above

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Learning Objectives

Learning Objectives

Related questions

Illinois Tool Company's (ITC) degree of total leverage (DTL) is 3.00 at a sales volume of $9 million. Determine ITC's percentage change in earnings per share (EPS) if forecasted sales increase by 20 percent to $10,800,000.

A) 60%
B) 50%
C) 32%
D) None of the above